New CIETAC Arbitration Rules: a Step Forward to CIETAC Internationalization?

CIETAC – the China International Economic and Trade Arbitration Commission – is the best known Chinese arbitration body. When it comes to the choice of an arbitration body, for foreign companies doing business in China, CIETAC is usually a viable alternative to well-established international arbitration institutions (such as the Hong Kong International Arbitration Centre, the Singapore International Arbitration Centre and the Arbitration Institution of the Stockholm Chamber of Commerce).

CIETAC has recently revised its 2005 arbitration rules (“2005 Rules”). The revised arbitration rules will come into force on 1 May 2012.

The CIETAC arbitration rules cover procedural aspects such as the case allocation criteria between CIETAC Beijing and its sub-commissions throughout China (Shenzhen, Shanghai, Tianjin and Chongqing), the place and the language of the arbitration, etc.

The following are the main changes under the 2012 Rules:

Jurisdiction of CIETAC Beijing by default

Under the 2005 Rules, in the absence of an agreement between the parties, the claimant was entitled to choose whether to start arbitration proceedings before CIETAC Beijing or before one of its sub-commissions. Now, in such a situation, CIETAC Beijing will have jurisdiction over the case, unless objections by the parties reallocate the case to a sub-commission.

This change seems fair as it prevents the claimant from the undue advantage of choosing the venue of the arbitration.

Place of Arbitration

In addition to the venues of CIETAC Beijing and its sub-commissions, CIETAC can decide “the place of arbitration to be another location having regard to the circumstances of the case” (Article 7.2). CIETAC’s official interpretation of this provision is that CIETAC might also decide that the place of arbitration is outside China. This is surely a substantial change. However, CIETAC will have to face at least two challenges: (i) the logistics of administering arbitration proceedings abroad; (ii) the application of the procedural mandatory rules of the jurisdiction where the place of arbitration is located. In this regard, it is worth noticing that, in the 2012 Rules, there is no reference to the Arbitration Law of the People’s Republic of China, whereas the 2005 Rules set out that they were “formulated in accordance with the Arbitration Law of the People’s Republic of China” (Article 1).

Increase of the threshold for summary proceedings

Summary proceedings shorten the procedural deadlines to speed up the arbitration. Under summary proceedings, the arbitral tribunal should issue the arbitral award within three months of the formation of the arbitration tribunal (otherwise the deadline is six months). In addition, there is only one arbitrator. With the 2012 Rules, cases of up to RMB 2 million value could be dealt under summary proceedings. Under the 2005 Rules the limit was RMB 500,000.

Arbitration Language

As previously, Chinese is still the arbitration language unless the parties choose otherwise. Again, as is the case for the place of arbitration, CIETAC may designate any other language “having regard to the circumstances of the case” (Article 71.1). In theory, this could lead to the adoption of English (or another foreign language) as the arbitration language, where the parties have not agreed on an arbitration language.

Overall, CIETAC’s revision of its arbitration rules appears to be a genuine effort to make CIETAC a more international arbitration institution.

On the other hand, the actual implementation of certain changes embodying CIETAC internationalization (i.e. conducting arbitration proceedings abroad and use of foreign languages) largely depends on CIETAC’s discretion. It remains to be seen how CIETAC will use this discretion.

The “internationalization” of CIETAC is conducive to promoting CIETAC as a credible option to other international arbitration institutions. A CIETAC arbitration is often requested by the Chinese party and this request is now more likely to receive consideration from the foreign company. The “internationalization” of CIETAC is also important if CIETAC is to become a choice not only for disputes regarding China projects or transactions but also for disputes regarding the increasing number of projects and transactions conducted by Chinese companies abroad.

From the parties’ point of view, the best thing is to have an arbitration clause (or agreement) which is as comprehensive as possible in order to limit discretionary decisions by the arbitration commission (whether CIETAC or other arbitration body).

 


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